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State-run oil producers would not have to bear the subsidy burden in the current year if global oil prices continue to show a downward trend, said Petroleum Minister Dharmendra Pradhan on Tuesday.
“The subsidy-sharing formula for the fourth quarter of FY15 can be extended to FY16 if the current market situation prevails,” said Pradhan at a ‘Round Table on Hydrocarbons’, hosted by the Federation of Indian Chambers of Commerce and Industry. Global market conditions have allowed for a subsidy concession to upstream companies, he added.
Earlier, Petroleum Secretary Saurabh Chandra said the government had decided to exempt state-owned Oil and Natural Gas Corporation (ONGC) and Oil India from paying liquefied petroleum gas subsidies in the current financial year.
“Since upstream national oil companies’ contribution to underrecoveries is reduced, to that extent their resources are freed to invest in exploration and production,” Chandra said.
The government would also soon auction 69 marginal oil and gas fields of ONGC and Oil India, the country's oil secretary said on Tuesday. "Marginal field policy will have approval soon for 69 fields which ONGC and Oil India have agreed to give. We hope to put them for bidding," Chandra.
Chandra said that the two state explorers would invest $6 billion in exploration and production during the current year, as they look to arrest declining oil and gas production.
Chandra said the exemption to ONGC and OIL on oil subsidy in the fourth quarter comes after the ministry of finance agreed to meet the revenue loss on fuel sales. The finance ministry will pay Rs 5,324 crore in fuel subsidy for the January-March quarter, effectively meeting all revenue retailers losses on selling domestic LPG and kerosene at government-controlled rates.
Under-recoveries on selling fuel below cost, of Rs 67,091 crore in first nine months of the fiscal were fully accounted for by the subsidy support and dole out from upstream firms like ONGC.
ONGC and OIL will now have to bear subsidy on only kerosene in 2015-16, Chandra said.
Based on average crude oil price of $60 per barrel, LPG subsidy for 2015-16 may be about Rs 18,000 crore and kerosene subsidy will be Rs 13,000 crore.
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